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For the week ending Friday, January 6th
Commodity prices started the new year in positive territory on Tuesday following the holiday break, with official LME 3-mo. copper starting the trading week at $7,680/mt, while official 3-mo. aluminum firmed up to $2,068.50/mt by Wednesday morning.

While nonferrous prices see-sawed in the second half of the week as the Euro hit fresh lows against the dollar, other commodity prices benefited from a batch of supportive economic news, including improving U.S. numbers on manufacturing, construction spending, factory orders and unemployment. In New York, NYMEX crude oil, which started 2012 just under the $100/bbl mark, was trading as high as $103.74/bbl intra-day at midweek.

Gold prices also strengthened, with COMEX gold for Feb delivery climbing from a 2011 closing price of $1,567/to to as high as $1,626.80/to intra-day on Thursday. On Wall Street, stocks also received a new year’s bounce, with the Dow Industrials posted consecutive gains on Tuesday (+180 pts) and Wednesday (+21 pts) before settling back on Thursday ahead of the Labor Department’s much anticipated jobs report on Friday. On Friday, better than expected jobs numbers in the U.S. were offset by continued economic concerns in Europe as base metal prices opened the day mixed. At $7,540/mt, Reuters reports that LME official 3-mo. copper was up from yesterday’s official price but little changed from Thursday close, while official 3-mo. aluminum firmed to $2,039/mt this morning after Alcoa announced a 12% reduction in smelter capacity.

In New York, commodity markets bounced around as COMEX copper for March delivery was off this morning but recovered to around $3.43/lb. this afternoon, while crude oil prices retreated below $102/bbl. Following gains earlier in the day in Europe, U.S. stocks were in negative territory for most of the day, with the S&P 500 down around a quarter percentage point in early afternoon trading as the Euro dipped briefly below the $1.27 mark.

Macro news…
The big economic release this week was the Bureau of Labor Statistics’ employment report which came out this morning, and the numbers were encouraging. Beating expectations, the private sector added 212,000 jobs in December and after taking into account the 12,000 reduction in government sector jobs, nonfarm payrolls increased by 200,000. Of note, BLS reports that the manufacturing sector added 23,000 jobs last month, including gains in the transportation equipment (+9,000), fabricated metals (+6,000) and machinery (+5,000) sectors.

In addition, the unemployment rate last month reportedly decreased to 8.5% from an upwardly revised 8.7% in November, while the number of unemployed persons (13.1 million) also contracted, albeit from historically high levels.

(For more on today’s unemployment report, see our excellent Guest Contributor’s column below). In other positive news, the Institute for Supply Management’s latest Purchasing Managers Index increased from 52.7 in November to 53.9 in December, indicating the 29th consecutive month of expansion in the manufacturing sector.

Numbers on new orders, production, employment and export orders were all trending up in December as well: And if that wasn’t enough positive news for you, new figures released this week also show that U.S. factory orders increased 1.8% in November and construction spending rebounded 1.2% for the month. And while domestic motor vehicle sales reportedly dipped to 10.25 million at a seasonally adjusted annual rate in December, total light vehicle sales in the U.S. were still up 9% year-on-year last month. Combined with improving labor market and manufacturing numbers, the data continue to point to steadily improving economic conditions in the U.S. Unfortunately, the outlook in Europe didn’t improve this week amid reports of falling retail sales in Germany, deteriorating consumer confidence in France and rising unemployment in Italy.

This morning, press reports indicate that the European Central Bank had to step in to buy Italian and Spanish debt in an attempt to stem rising borrowing costs as the yield on 10-year Italian bonds breached the 7% level. As a result, the Euro reportedly fell to its lowest level since September 2010 in intra-day trading today, briefly dipping to just under $1.27. As we point out in our 2012 market forecast article to appear in Scrap magazine, the economic outlook for Europe this year remains bleak, with the European Commission forecasting 0.5 percent growth in the eurozone in 2012 as others fear Europe is already slipping back into recession. Not helping.

Ferrous…
After prices rebounded in December, the consensus for January and early 2012 seemed to be for firmer ferrous scrap market conditions in the U.S. This morning, Commercial Metals Company (CMC) reported improved year-on-year net earnings for the fiscal first quarter that ended on November 30, with company president and CEO Joe Alvarado quoted as saying, “Although ferrous scrap prices started to fall near the end of the quarter, our Americas Recycling segment still achieved higher adjusted operating profit than last year's first quarter. We are also encouraged to see our backlog at levels higher than last quarter." He was also quoted as saying that while “Our second quarter is historically our slowest quarter due to weather-related slowdowns in construction and holiday seasons around the world… we expect scrap prices to rise in the second quarter of 2012, which should benefit our recycling operations.” According to The Steel Index, early reports this year indicate that prices are firming, with TSI’s reference price for shredded up 1.5% this week to $460/lt delivered Midwest mill.

Earlier in the week, Scrap Price Bulletin raised its composite prices for No. 1 HMS and No. 1 dealer bundles to $410.83/gt and $494.17/gt, respectively. Here’s a look at how No. 1 Bushelings and HRC prices performed through the end of 2011: In other news this week, AMM reports that Nucor raised its hot-rolled steel prices by $30/ton to $770/ton for all new orders, while RG steel resumed processing available inventory at Sparrows Point this week, although it will “continue to keep its ‘L’ blast furnace offline until further notice.” For the last week of 2011, domestic crude steel production is estimated to have dropped to 1.87 million net tons, down 1.7% from the preceding week at capacity utilization eased to 75.3%, while production for the year advanced 7.9% to approximately 95.6 million st, according to the latest figures from the American Iron and Steel Institute.

Nonferrous…
Lots of supply side developments in the nonferrous markets this week as strikes reportedly ended at Freeport’s Grasberg copper mine in Indonesia and at the Kansanshi copper mine in Zambia.

In Canada, published reports indicate that Rio Tinto declared force majeure on shipments from its Alma aluminum smelter due to a labor dispute and from the Shawinigan smelter due to a power outage. Macquarie reports that the Alma has a production capacity of 440,00tpa and Shawinigan has a capacity of 100,000tpa. In addition, Alcoa announced that it will “close or curtail” 12% of its global aluminum smelting capacity, representing about 531,000 metric tons of capacity, including the permanent closure of its smelter in Alcoa, Tennessee and two potlines in Rockdale, Texas, according to a company press release. For 2011, Macquarie reports that the average price of aluminum increased 10% to $1.09/lb., while copper averaged $4.00/lb. for the year, up nearly 17% from 2010. However, monthly average prices for copper and aluminum in December 2011 were reportedly down 17% and 14%, respectively, from one year ago.

This week, LME 3-mo. copper started the year on a positive note, climbing to $7,680/mt on Monday morning before falling back to $7,485.50 as of Thursday morning. By week’s end, LME copper was trading back up around $7,580/mt as LME aluminum firmed to $2,069/mt. Our friends at Fastmarkets.com note that “Today's closes set the levels at which the annual portfolio adjustments, which run from January 9 to January 13, are based,” including the Dow Jones-UBS Commodity Index (DJ-UBS CI) and the S&P GSCI Commodity Index (S&P GSCI). As exchange prices bounced around, secondary aluminum prices were reportedly a little firmer this week with old Sheet and Cast indicated in the upper 60 to 70 cent range, siding in the high 60’s and MLC mostly in the low 70’s.

Meanwhile, Platts was reporting tighter copper scrap spreads this week, with Bare Bright indicated at 6 cents under COMEX (from 8 cents under previously), burnt No. 1 at 18 cents under and No. 2 at 34 cents under. Here’s a look at the 2011 trend in monthly refined and copper scrap prices: Guest Contributor: Jason Schenker ChFC®, ERP®, CFP® • President and Chief Economist of Prestige Economics, LLC • Author of the Upcoming Scrap Benchmarking Book: Be The Shredder, Not The Shred (April 2012) • The World’s Leading Commodity and Financial Market Forecaster www.prestigeeconomics.com/

December Employment Report: Very Strong Report Shows Continued Job Improvement Main Takeaways Today’s U.S. Employment Report for December was decisively positive. This is the best possible type of report, as job creation in December was strong and the unemployment rate fell. This report provides further justification for continued modest optimism about the U.S. economy in 2012. Nevertheless, this report does not dispel our rising concerns about sovereign debt issues in Europe, geopolitical risks in Iran, and the fact that the growth rate of the Chinese economy in 2012 will be at the slowest pace since 2001. Critical Numbers in the December Jobs Report 1. December change in jobs was listed as a positive 200,000 jobs. 2. December unemployment fell to 8.5 from 8.6 percent. 3. November change in jobs was revised lower from +120,000 to +100,000 jobs. 4. October change in jobs was revised higher from +100,000 to +112,000 jobs. 5. Participation Rate was unchanged at 64.0 percent.

6. Lost government jobs in December numbered 12,000. Market Impact This report was better than Consensus expectations for both the unemployment rate and the number of jobs created. As such, today’s employment report could give equities, industrial metals prices, and oil prices a nice boost. There is a risk, however, that the extremely bearish factors lurking in the background (e.g. European sovereign debt, slowing global growth, Iranian geopolitical risk) will prevent the markets from holding on to the gains achieved in the wake of today’s very positive jobs report. Job Creation and Losses Job creation in December occurred across a number of categories, including transportation and warehousing, retail trade, manufacturing, mining, food services, professional and business services, construction, and healthcare. There were also 12,000 lost government jobs. It is positive that the rate of government job losses has slowed in recent months.

This Week’s Quote:
“If you don't think every day is a good day, just try missing one.” -- Cavett Robert

This Week’s Short Story:
Two women met for the first time since graduating from college… One asked the other, "You were always so organized in school, did you live a well-planned life?" "Yes," said her friend. "My first marriage was to a millionaire; my second marriage was to an actor; my third marriage was to a preacher; and now I'm married to an undertaker." Her friend asked, "What do those marriages have to do with a well-planned life?" "One for the money, two for the show, three to get ready, and four to go."